Reduce Overhead Costs With AP Automation
Reduce Overhead Costs With AP Automation
Whether you have a new or well-established business, overhead costs created by an accounts payable (AP) department can negatively affect your bottom line. This is especially true when talking about manual processing for AP. As the number of vendors and transactions increases, so does the amount of paper, time, and costly mistakes.
Instead of adhering to an outdated form of AP, businesses can look to AP automation for higher staff productivity and lower overhead costs.
Know Your Overhead Costs
Understanding unnecessary overhead costs is the first step toward reducing them. Any business expense unrelated to labor, materials, or fees is considered an overhead cost. That can include rent, internet payments, office supplies, and, of course, your AP department.
Since the entirety of AP is considered an overhead expense, it’s valuable to look at what makes up the total cost of AP. When calculating your total costs, consider the amount your business spends on:
AP employee labor
Paper for invoices
Envelopes and postage for paper check payments
ERP and other accounting tools
Knowing this baseline cost will create a better understanding of your current AP costs and where they can be reduced (or eliminated) moving forward.
AP Automation Reduces Processing Costs
By taking the total number of invoices paid and dividing them by the costs needed to pay them, you can calculate your AP cost per invoice. When talking about a company with manual AP processes, that cost is often four times higher than that of a company with AP automation in place, according to IOFM benchmarks.
Much of that has to do with how AP automation eliminates factors that drive invoice costs up when processed manually. That includes the gathering and management of data, tracking down purchasers, routing invoices, reconciling payments, and preparing reports.
Those tasks are completed faster and require significantly less employee supervision when AP automation is in place. Using IOFM benchmark calculations, if your company processes 5,000 invoices each month, you can count on over $55,000 in monthly savings just by automating your workflows.
Paper Is an Unnecessary Cost
Manual, paper-based processes used to be the norm because there was no good alternative. Today, paper has become a clear indication of a slow, costly AP process. With cloud-based solutions like Corpay Payments Automation, you can leverage secure, efficient payments while simultaneously eliminating unnecessary costs.
Companies relying on manual AP processes are paying for the materials used to process their invoices, like paper. They also pay for any mistakes made in data management, as they must be fixed using additional paper and employee time.
In fact, 22% of companies cite delays caused by time spent processing invoice exceptions as their top AP processing challenge. That’s a surprisingly high number of companies still relying on manual processes when there are AP automation solutions available.
Why Waste Employee Time?
The time employees spend on processing invoices and payments is wasted. Their talents could be used for more high-value tasks instead of updating vendor data and routing invoices to the correct parties. In a time when those tasks can be offloaded with automation, why create more work for less value?
This is especially true as remote work rises in popularity. Manual AP processes don't fit companies that have primarily remote staff unavailable to sort paper and stuff envelopes from home. In these instances, manual AP only adds complexity to a business.
Make the Change to AP Automation
With an understanding of overhead costs like supplies, employee time, and transaction fees, it’s clear that AP automation can quickly reduce costs. More abstract costs like employee time and value may be harder to calculate, but when it comes down to value-added tasks at work, it’s ideal to have your AP team able to focus on other strategic initiatives.
Why not look into all the benefits of AP automation instead of dealing with the costs and constraints of manual AP? Contact our in-house experts at Corpay today to discuss your specific AP challenges and future goals.